WHAT TO EXPECT WHEN PURCHASING REO PROPERTIES

For buyers who are considering purchasing an REO property, understanding the process will help ensure a successfull purchase. Banks and lenders which find themselves in a position of owning real estate are often motivated sellers. They want to get these properties off their books and back on the market. There are many good deals if you are willing to do some extra work. Here are five things buyers should expect when making an offer on REO properties.

AS-IS, WHERE-IS -REO homes are sold AS-IS, WHERE-IS, meaning there is no seller’s disclosure regarding the condition of the property. This puts the burden of inspecting the property directly on the buyer. If the buyer finds significant problems with a property and can make a strong case for the needed repairs they are usually able to negotiate a lower sale price. But remember it is up to the buyer to uncover these problems in advance because once the sale is final there is no recourse.

Selling Price – Bargains are out there but do your homework. Know the sales price of other homes in the neighborhood. If you are going to make a low offer be sure to have a strong case to support your offer.

Financing – Banks will look closely at financing. Lenders are looking for qualified buyers and do not want to lose time working with a buyer who cannot qualify for and ultimately close the loan. When possible, take the time to get pre-approved before making the offer. To insure that potential buyers are truly qualified, some sellers require that all buyers using financing as the method of payment, be pre-qualified through the seller’s designated lender. The buyer may obtain financing through the lender of their choice.

Contingencies – Offers with the least number of contingencies are typically favored, if not expected. Banks who are dealing with a large volume of REO properties on their books may not want to deal with contingency heavy offers. If the bank accepts an offer with contingencies, that takes the property off the market, they may lose another, more appealing offer from a more qualified buyer. Many simply will not consider the offer. Whenever possible, try to keep all contingencies to a minimum. Banks consider offers with larger deposits to be more secure. The more cash a buyer has invested in the property the less likely they will be to default on or fail to complete the sale as agreed. It is not uncommon for a bank to require deposits to be non-refundable.

Earnest Money Deposits -Banks consider offers with larger deposits to be more secure. The more cash a buyer has invested in the property the less likely they will be to default on or fail to complete the sale as agreed. It is not uncommon for a bank to require deposits to be non-refundable.